R&D Incentives

Research and development (R&D) are considered to be among the most important factors driving the future growth of the German economy. Industry and the public sector have committed to spending at least 3 percent of Germany’s GDP on R&D activities, which amounts to about EUR 70 billion per year.

R&D projects can count on numerous financial instruments for financial support. There are many programs allocating R&D grants, loans with reduced interest rates, and special partnership programs financed by the EU, the German federal government, or the German states.

R&D Grants on National Level

The 7th Research Framework Program (FP7) is the R&D financing instrument of the EU for 2007 to 2013. It offers financial support in the form of grants and covers up to 75 percent of project expenditures (for small and medium-sized enterprises). FP7 is the world’s largest research funding program with an overall budget of EUR 50.5 billion, the majority of which is allocated to ten research fields:

• Health
• Food, agriculture and fisheries, biotechnology
• Information & communication technologies
• Nanosciences, nanotechnologies, materials & new production technologies
• Energy
• Environment (including climate change)
• Transport (including aeronautics)
• Socioeconomic sciences and the humanities
• Space
• Security

Funding through FP7 is usually applied for by building a transnational consortium that submits a project proposal in response to a call for proposals. In the official calls for proposals, which take place once or twice per year for each research field, the EU publishes the research topic, the rules of participation, and the available budget.

The EU’s 7th Research Framework Program
http://cordis.europa.eu

R&D Grants on National Level

Germany’s High-Tech Strategy was approved by the government in August 2006. It encompasses a series of initiatives and programs that will allocate EUR 15 billion to cutting-edge research and technology by 2009. The strategy establishes specific objectives for 17 areas of innovation, creating a clear roadmap to be followed in each area.

High-Tech Strategy budgets for different secotrs through the end of 2010 (in € million)

The available R&D grants are offered through programs with or without a technological focus. Funding is generally decided by means of competition among project ideas.

Grant levels can reach 50 percent of eligible project costs. Higher grant levels are available for applicants based in eastern Germany or for small and medium-sized enterprises (SME). Cooperation between project partners, especially between enterprises and research institutions, is usually required.

For programs with a technological focus, there are periodic calls for proposals published by the relevant ministry.

R&D Grants on Regional Level

R&D grants are also available in all 16 German states and are normally reserved for SME. The funding policy in some states focuses on specific industry clusters, but programs without technological focus do also exist. Grants cover up to 80 percent of eligible project costs and depend on the location, size of the company, and the type of the R&D project. Cooperation between project partners is not always necessary.

R&D Loans and Partnerships

R&D loans can be an alternative to R&D grants and entail several specific advantages:

• They are usually not attached to a specific technology field
• Application is always possible (no deadlines)
• They can cover higher project costs

R&D loans are provided by different governmental programs. For instance, the ERP Innovation Program offers 100 percent financing of eligible R&D project costs up to EUR 5 million. Other R&D loan programs have defined similar incentive criteria. In addition, the 16 German states have their own loan programs primarily aimed at SME.

The Bank for Reconstruction (KfW) as well as state-owned venture capital companies offer shareholdings (usually in the form of a silent minority partnership) to technically oriented companies. Direct shareholding by a public investment company is also possible. Conditions are negotiated on a case by case basis.

NRW.BANK Development Programs

NRW.BANK offers a wide range of financial support for business start-ups and to ensure company survival: investment grants, subordinated loans, venture capital, and releases from liability.

NRW.BANK Start-Up Loan: Business founders can be supported with loans ranging from 25,000 to 5 million euros. The financing portion may amount to up to 100 percent of the eligible investment costs or working capital. The acquisition of land and buildings as well as furniture and fixtures and the takeover of existing SMEs are also eligible for funding. The NRW.BANK start-up loan is offered with terms of five, ten or twenty years. The start-up loan includes an optional indemnity bond from the Bürgschaftsbank NRW, for which business founders may apply as part of a standardized process.

NRW.BANK SME Loan: This is a low-interest loan from NRW.BANK to finance business start-ups, small and medium-sized enterprises, and independent professionals. The NRW.BANK SME Loan is available as both an investment loan and a working capital loan. The amount of the loan can range from 25,000 to 5 million euros. This promotion program is offered jointly by NRW.BANK and KfW.

Contacts:
NRW.BANK
Advice Center Rhineland
Kavalleriestraße 22
D-40213 Düsseldorf
Tel.: +49 (0)211/91741-4800
Fax: +49 (0)211/91741-9219

Branch Office of NRW.BANK in Münster
Advice Center Westphalia
Friedrichstraße 1
D-48145 Münster
Tel.: +49 (0)251/91741-4800
Fax: +49 (0)251/91741-2666
www.nrwbank.de